Record Results in Canadian and European Regions Drive Quarterly Performance
- Canadian region delivers another strong quarter as it continues to benefit from solid operating leverage
- EMEA posts strongest results ever based on solid performance from Nectar UK
- 2012 guidance confirmed
|SECOND QUARTER HIGHLIGHTS||Three Months Ended June 30,||Year Over Year3|
|(in millions of Canadian dollars, except per share amounts)||2012||2011||% Change|
|As Reported||As Reported||
|Earnings per Common Share||0.19||0.07||171.4||na|
|Free Cash Flow before Dividends Paid2||74.2||81.5||(9.0)||na|
|1||Constant currency excludes the translation effect of foreign operations on consolidated results. For more information on constant currency please refer to the Use of Non-GAAP Financial Information section of this news release.|
|2||A non-GAAP measurement, please refer to the Use of Non-GAAP Financial Information section of this news release.|
|3||Discrepancies in variances may arise due to rounding.|
MONTREAL, Aug. 9, 2012 /CNW Telbec/ - (TSX: AIM) Aimia today reported its financial results for the second quarter ended June 30, 2012. All financial information is in Canadian dollars unless otherwise noted.
"I'm extremely pleased with our performance in the quarter" said Rupert Duchesne, Group Chief Executive. "Our Canadian business posted another strong quarter while EMEA achieved its fourth consecutive quarter of double digit top line growth, reflecting solid results from Nectar UK as it continues to benefit from the growth in its partner base over the past couple of years. The strong performance posted by our European operations was achieved despite the ongoing challenges of a very difficult economic environment. Based on the strength of our first half performance we are confirming our guidance for the year."
Second Quarter Highlights (Period ended June 30, 2012 versus period ended June 30, 2011)
Consolidated - A Strong Quarter
- Second quarter Gross Billings of $554.3 million, an increase of 2.2 per cent or 1.7 per cent on a constant currency basis
- Adjusted EBITDA of $102.0 million in the quarter, an increase of 32.7 per cent
- Record Adjusted EBITDA mainly due to significant margin expansion
Canada - Operating Leverage Drives Performance
- Second quarter Gross Billings of $332.0 million compared with $324.1 million in the same period of 2011, an increase of 2.4 per cent
- Gross Billings rose in the second quarter driven by an increase in financial partner activity partially offset by a decrease in airline partner activity including a reduction in accumulation at Air Canada
- Adjusted EBITDA of $106.4 million in the second quarter, an increase of 21.8 per cent compared to the prior year period
- Aeroplan Miles issued increased by 4.4 per cent in the quarter due to increased promotional activity, while total Aeroplan Miles redeemed decreased 0.6 per cent in the quarter compared to the same period in 2011
Europe, Middle East & Africa (EMEA) - Fourth Consecutive Quarter of Double Digit Gross Billings Growth - Strong Momentum Continues
- Second quarter Gross Billings of $157.6 million, an increase of 14.4 per cent or 13.7 per cent on a constant currency basis
- Adjusted EBITDA of $12.3 million in the quarter, an increase of $10.2 million
- Nectar Points issued in the second quarter increased by 13.4 per cent compared to the same period in 2011, driven by strong underlying growth at Sainsbury's, British Gas, and Homebase, and new contract terms with the program's main sponsor
- Redemption activity for the Nectar Program increased by 14.2 per cent in the quarter mainly driven by an increase in the number of Nectar Points in circulation
- In the second quarter, Nectar Italia Points issued remained relatively constant year-over-year, while Nectar Italia points redeemed increased significantly consistent with members having increased availability of points in their accounts due to the program's growth
- Gross Billings for Intelligent Shopper Solutions (ISS) increased by 14.0 per cent driven by increased activity related to the international expansion of its services
US & Asia Pacific - Stabilized - US Environment Continues to be Challenging
- Second quarter Gross Billings of $65.6 million, a decrease of 19.0 per cent or 21.2 per cent on a constant currency basis compared to the same period 2011. Excluding the impact of the Qantas exit, Gross Billings were down 5.0 per cent or 7.7 per cent on a constant currency basis
- Second quarter Adjusted EBITDA of $(0.5) million, virtually unchanged
- The US continues to be a challenging environment, however, the region is making good strides in terms of stabilizing, repositioning and focusing on higher value-add strategic loyalty services
Club Premier - Update
Club Premier continues to perform exceptionally well. It generated Gross Billings of more than US$36 million this quarter, an increase of 26 per cent over last year. Adjusted EBITDA margins remain in excess of 30 per cent. Year-over-year, the number of members and commercial partners has increased by 10 per cent and 22 per cent, respectively. Aimia and Aeromexico have initiated discussions with the intent of Aimia increasing its equity participation in PLM. While there can be no assurances that an agreement will be reached, the parties will seek to reach an agreement by the end of 2012.
Cash Flow and Financial Position
At June 30, 2012, Aimia had $200.3 million of cash and cash equivalents, $21.5 million of restricted cash, $73.1 million of short-term investments and $283.9 million of long-term investments in bonds, for a total of $578.8 million.
Aimia's Free Cash Flow (before dividends paid) was $74.2 million for the second quarter of 2012 compared to $81.5 million for the second quarter of 2011. Free Cash Flow in the quarter decreased year over year primarily due to timing of changes in net operating assets, higher cash taxes and higher capital expenditures.
The Board of Directors declared a quarterly dividend of $0.16 per common share, payable on September 28, 2012 to shareholders of record at the close of business on September 14, 2012.
The Board also declared a quarterly dividend in the amount of $0.40625 per Cumulative Rate Reset Preferred Share, Series 1, payable on September 28, 2012 to the holders of record at the close of business on September 14, 2012.
Dividends paid by Aimia to Canadian residents on both its common and preferred shares are "eligible dividends" for Canadian income tax purposes.
While it is likely that the higher than forecasted Gross Billings growth rate experienced in the first half of the year in the EMEA region will slow in the second half, EMEA is on track for a strong year and is compensating for some top line softness in the Canada and US & APAC business segments. As a result, we are reiterating our 2012 annual guidance provided in the February 22, 2012 earnings press release.
Guidance (as provided February 22, 2012)
For the year ending December 31, 2012, Aimia expects to report the following:
|Key Financial Metric||Target Range|
|Gross Billings Growth 1||Between 3% and 5%|
|Adjusted EBITDA2||Between $370 and $380 million|
|Free Cash Flow 2,3||Between $220 million and $240 million|
|Capital Expenditures||To approximate $55 million|
|Income Taxes||Current income tax rate is anticipated to approximate 27% in Canada and 17% in Italy. The Corporation expects no significant cash income taxes will be incurred in the rest of its foreign operations.|
|Business Segment Gross Billings Growth Outlook|
|Canada||Between 2% and 4%|
|EMEA||Between 8% and 11%|
|US & APAC1||Between -2% and 2%|
|Nectar Italia||Greater than €60 million in Gross Billings|
|1||The Gross Billings growth guidance excludes the effect of a client loss (Qantas) in APAC at the end of the first quarter of 2012. The target growth ranges are based on 2011 reported Gross Billings, excluding $40 million related to Qantas. The client loss will have a negligible impact on Adjusted EBITDA.|
|2||The Adjusted EBITDA and Free Cash Flow outlook range includes an assumption of planned incremental operating expenses in business development activities, principally in the U.S., India and Brazil, technology platform related expenditures that are operating in nature and additional brand related expenses associated with our new branding, which in total will approximate $20 million in 2012.|
|3||Free Cash Flow before dividends.|
The above guidance excludes the effects of fluctuations in currency exchange rates. In addition, Aimia made a number of economic and market assumptions in preparing its 2012 forecasts, including assumptions regarding the performance of the economies in which the Corporation operates and market competition and tax laws applicable to the Corporation's operations. The Corporation cautions that the assumptions used to prepare the above forecasts for 2012, although reasonable at the time they were made, may prove to be incorrect or inaccurate. Accordingly, our actual results could differ materially from our expectations as set forth in this news release. The outlook provided constitutes forward-looking statements within the meaning of applicable securities laws and should be read in conjunction with the "Caution Concerning Forward-Looking Statements" section.
Use of Non-GAAP Financial Information
In order to provide a better understanding of the results, the following indicators are used:
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization
EBITDA adjusted for certain factors particular to the business, such as changes in deferred revenue and Future Redemption Costs ("Adjusted EBITDA"), is used by management to evaluate performance, and to measure compliance with debt covenants. Management believes Adjusted EBITDA assists investors in comparing the Corporation's performance on a consistent basis without regard to depreciation and amortization, which are non-cash in nature and can vary significantly depending on accounting methods and non-operating factors such as historical cost.
Adjusted EBITDA is not a measurement based on GAAP, is not considered an alternative to operating income or net income in measuring performance, and is not comparable to similar measures used by other issuers. For a reconciliation to GAAP, please refer to the Summary of Consolidated Operating Results and Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Earnings and Free Cash Flow included in the attached schedule. Adjusted EBITDA should not be used as an exclusive measure of cash flow because it does not account for the impact of working capital growth, capital expenditures, debt repayments and other sources and uses of cash, which are disclosed in the statements of cash flows.
Adjusted Net Earnings
Adjusted Net Earnings provides a measurement of profitability calculated on a basis consistent with Adjusted EBITDA. Net earnings attributable to equity holders of the Corporation are adjusted to exclude Amortization of Accumulation Partners' contracts, customer relationships and technology, share of net earnings (loss) of PLM and impairment charges. Adjusted Net Earnings includes the Change in deferred revenue and Change in Future Redemption Costs, net of the income tax effect and non controlling interest effect (where applicable) on these items at an entity level basis.
Adjusted Net Earnings is not a measurement based on GAAP, is not considered an alternative to net earnings in measuring profitability, and is not comparable to similar measures used by other issuers. For a reconciliation to GAAP, please refer to the Summary of Consolidated Operating Results and Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Earnings and Free Cash Flow included in the attached schedule.
Standardized Free Cash Flow ("Free Cash Flow")
Free Cash Flow is a non-GAAP measure recommended by the CICA in order to provide a consistent and comparable measurement of free cash flow across entities of cash generated from operations and is used as an indicator of financial strength and performance.
Free Cash Flow is defined as cash flows from operating activities, as reported in accordance with GAAP, less adjustments for:
|(a)||total capital expenditures as reported in accordance with GAAP; and|
|(b)||dividends, when stipulated, unless deducted in arriving at cash flows from operating activities.|
For a reconciliation to cash flows from operations please refer to the Summary of Consolidated Operating Results and Reconciliation of EBITDA, Adjusted EBITDA, Adjusted Net Earnings and Free Cash Flow included in the attached schedule.
EBITDA and Free Cash Flow are non-GAAP measurements recommended by the CICA in accordance with the recommendations provided in their October 2008 publication, Improved Communications with Non-GAAP Financial Measures - General Principles and Guidance for Reporting EBITDA and Free Cash Flow.
Because exchange rates are an important factor in understanding period to period comparisons, the presentation of various financial metrics on a constant currency basis or after giving effect to foreign exchange translation, in addition to the reported metrics, helps improve the ability to understand operating results and evaluate performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant over the periods. Constant currency is derived by calculating current-year results using prior-year foreign currency exchange rates. Results calculated on a constant currency basis should be considered in addition to, not as a substitute for, results reported in accordance with GAAP and may not be comparable to similarly titled measures used by other companies.
Q2 2012 Conference Call / Audio Webcast
Aimia will host a conference call to discuss its second quarter 2012 financial results at 8:00 a.m. ET on Friday, August 10, 2012. The call can be accessed by dialing 1-888-231-8191 or 647-427-7450 for the Toronto area. The call will be simultaneously audio webcast at:
A slide presentation intended for simultaneous viewing with the conference call will be available the evening of August 9, 2012 at: http://www.aimia.com/English/Investors/Financial-Reports/Quarterly-Reports/default.aspx and an archived audio webcast will be available at: http://www.aimia.com/English/Investors/Presentations-and-Events/Events/default.aspx for ninety days following the original broadcast.
The audited consolidated financial statements, the MD&A and a financial
highlights presentation will be accessible on the investor relations
Aimia Inc. ("Aimia") is a global leader in loyalty management. Aimia's unique capabilities include proven expertise in delivering proprietary loyalty services, launching and managing coalition loyalty programs, creating value through loyalty analytics and driving innovation in the emerging digital and mobile spaces. Aimia owns and operates Aeroplan, Canada's premier coalition loyalty program and Nectar, the United Kingdom's largest coalition loyalty program. In addition, Aimia has majority equity positions in Air Miles Middle East and Nectar Italia as well as a minority position in Club Premier, Mexico's leading coalition loyalty program and Cardlytics, a US-based private company operating in merchant-funded transaction-driven marketing for electronic banking.
Aimia is a Canadian public company listed on the Toronto Stock Exchange (TSX: AIM) and has over 3,400 employees in more than 20 countries around the world. For more information about Aimia, please visit www.aimia.com.
Follow us on Twitter: http://twitter.com/#!/aimiainc.
Caution Concerning Forward-Looking Statements
Forward-looking statements are included in this news release. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions. Such statements may involve but are not limited to comments with respect to strategies, expectations, planned operations or future actions.
Forward-looking statements, by their nature, are based on assumptions and are subject to important risks and uncertainties. Any forecasts, predictions or forward-looking statements cannot be relied upon due to, among other things, changing external events and general uncertainties of the business and its corporate structure. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, dependency on top accumulation partners and clients, conflicts of interest, greater than expected redemptions for rewards, regulatory matters, retail market/economic conditions, industry competition, Air Canada liquidity issues, Air Canada or travel industry disruptions, airline industry changes and increased airline costs, supply and capacity costs, unfunded future redemption costs, failure to safeguard databases and consumer privacy, changes to coalition loyalty programs, seasonal nature of the business, other factors and prior performance, foreign operations, legal proceedings, reliance on key personnel, labour relations, pension liability, technological disruptions and inability to use third party software, failure to protect intellectual property rights, interest rate and currency fluctuations, leverage and restrictive covenants in current and future indebtedness, uncertainty of dividend payments, managing growth, credit ratings, as well as the other factors identified in this news release and throughout Aimia's public disclosure record on file with the Canadian securities regulatory authorities.
The forward-looking statements contained herein represent Aimia's expectations as of August 9, 2012, and are subject to change after such date. However, Aimia disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.
SUMMARY OF CONSOLIDATED OPERATING RESULTS AND RECONCILIATION OF EBITDA, ADJUSTED EBITDA, ADJUSTED NET EARNINGS AND FREE CASH FLOW
Three Months Ended
Six Months Ended
|(in thousands, except share and per share information)||
|Gross Billings from the sale of Loyalty Units||414,026||388,203||800,010||750,942||6.7||6.5|
|Revenue from Loyalty Units||366,645||345,387||784,860||724,239||6.2||8.4|
|Revenue from proprietary loyalty services||107,771||136,807||230,228||276,445||(21.2)||(16.7)|
|Cost of rewards and direct costs||(279,900)||(297,737)||(602,296)||(625,353)||(6.0)||(3.7)|
|Gross margin before depreciation and amortization (a)||224,333||209,865||469,662||428,457||6.9||9.6|
|Depreciation and amortization||(8,543)||(8,096)||(17,005)||(15,916)||5.5||6.8|
|Amortization of Accumulation Partners' contracts, customer relationships and technology||(20,820)||(22,893)||(41,615)||(46,222)||(9.1)||(10.0)|
|Amortization of Accumulation Partners' contracts, customer relationships and technology||20,820||22,893||41,615||46,222||(9.1)||(10.0)|
|Operating income before amortization of Accumulation Partners' contracts, customer relationships and technology||74,726||62,285||170,662||135,076||20.0||26.3|
|Depreciation and amortization||8,543||8,096||17,005||15,916||5.5||6.8|
|Change in deferred revenue|
|Change in Future Redemption Costs(b)||(31,337)||(28,343)||(16,532)||(18,355)|
|(Change in Net Loyalty Units outstanding x Average Cost of Rewards per Loyalty Unit for the period)|
|Subtotal of Adjustments||18,732||6,473||2,448||(1,867)|
|Net earnings attributable to equity holders of the Corporation||34,852||15,095||80,145||40,523|
|Weighted average number of shares||172,203,650||180,173,985||173,011,895||182,839,306|
|Earnings per common share(d)||0.19||0.07||0.43||0.19|
|Net earnings attributable to equity holders of the Corporation||34,852||15,095||80,145||40,523|
|Amortization of Accumulation Partners' contracts, customer relationships and technology||20,820||22,893||41,615||46,222|
|Share of net earnings of PLM||(1,560)||(390)||(2,715)||(6,528)|
|Adjusted EBITDA Adjustments (from above)||18,732||6,473||2,448||(1,867)|
|Tax on adjustments(e)||(423)||(261)||4,865||2,869|
|Non-controlling interests share on adjustments above||(1,370)||(638)||(1,392)||(767)|
|Adjusted Net Earnings(c)||71,051||43,172||124,966||80,452||64.6||55.3|
|Adjusted Net Earnings per common share(c)(d)||0.40||0.22||0.69||0.41|
|Cash flow from operations||85,467||91,155||116,437||76,314|
|Free Cash Flow(c)||43,841||51,800||33,250||4,834||(15.4)||587.8|
|Total long-term liabilities||1,546,811||1,301,667||1,546,811||1,301,667|
|Total dividends per preferred share||0.406||0.406||0.813||0.813|
|Total dividends per common share||0.160||0.150||0.310||0.275|
|(a)||Excludes depreciation and amortization as well as amortization of Accumulation Partners' contracts, customer relationships and technology.|
|(b)||The per unit cost derived from this calculation is retroactively applied to all prior periods with the effect of revaluing the Future Redemption Cost liability on the basis of the latest available average unit cost.|
|(c)||A non-GAAP measurement.|
|(d)||After deducting dividends declared on preferred shares.|
|(e)||The effective tax rates, calculated as income tax expense / earnings before taxes for the period on an entity level basis, are applied to the related entity level adjustments noted above.|
|(f)||These figures do not include any effect attributable to the change in Breakage estimates made during the fourth quarter of 2011 in the Nectar and Air Miles Middle East programs.|
At June 30, 2012, the Corporation had three reportable and operating segments: Canada, EMEA and US & APAC. The table below summarizes the relevant financial information by operating segment:
|Three months ended June 30,|
|(in thousands of Canadian dollars)||2012||2011(f)||2012||2011(f)(g)||2012||2011(f)||2012||2011||2012||2011(f)||2012||2011(f)(g)|
|Operating Segments||Canada||EMEA||US & APAC||Corporate(b)||Eliminations||Consolidated|
|Gross Billings from the sale of Loyalty Units||277,218||271,969||136,808||116,234||-||-||-||-||-||-||414,026||388,203|
|Revenue from Loyalty Units||261,668||261,746||104,977||83,641||-||-||-||-||-||-||366,645||345,387|
|Revenue from proprietary loyalty services||37,060||46,455||3,123||6,848||67,588||83,504||-||-||-||-||107,771||136,807|
|Cost of rewards and direct costs||158,662||177,169||87,138||71,969||34,230||48,599||-||-||(130)||-||279,900||297,737|
|Gross margin before depreciation and amortization||152,356||142,839||38,619||32,338||34,156||35,173||-||-||(798)||(485)||224,333||209,865|
|Depreciation and amortization (a)||23,298||25,079||3,829||3,295||2,236||2,615||-||-||-||-||29,363||30,989|
|Operating expenses before share-based compensation||57,158||56,455||36,638||38,497||31,866||33,347||12,405||8,799||(798)||(485)||137,269||136,613|
|Total operating expenses||57,158||56,455||36,638||38,497||31,866||33,347||16,200||11,670||(798)||(485)||141,064||139,484|
|Operating income (loss)||71,900||61,305||(1,848)||(9,454)||54||(789)||(16,200)||(11,670)||-||-||53,906||39,392|
|Adjusted EBITDA (h)||106,368||87,363||12,291||2,085||(458)||(924)||(16,200)||(11,670)||-||-||102,001||76,854|
|Additions to non-current assets (d)||5,235||5,267||3,946||3,229||2,096||1,147||-||-||N/A||N/A||11,277||9,643|
|Non-current assets (d)||3,222,938||3,291,655||463,006||(e)||446,243||(e)||43,275||(e)||99,876||(e)||2,213||-||N/A||N/A||3,731,432||(e)||3,837,774||(e)|
|(a)||Includes depreciation and amortization as well as amortization of Accumulation Partners' contracts, customer relationships and technology.|
|(b)||Includes expenses that are not directly attributable to any specific operating segment. Corporate also includes the financial position and operating results of our operations in India, the investments in PLM and Cardlytics and Aimia's share of PLM's net earnings (loss).|
|(c)||Includes third party Gross Billings of $127.1 million in the UK and $39.3 million in the US for the three months ended June 30, 2012, compared to third party Gross Billings of $113.4 million in the UK and $46.8 million in the US for the three months ended June 30, 2011. Third party Gross Billings are attributed to a country on the basis of the country where the contractual and management responsibility for the customer resides.|
|(d)||Non-current assets includes amounts relating to goodwill, intangible assets and property and equipment.|
|(e)||Includes non-current assets of $411.9 million in the UK and $36.8 million in the US as of June 30, 2012, compared to non-current assets of $395.7 million in the UK and $94.3 million in the US as of June 30, 2011.|
|(f)||Intercompany revenue and expenses related to the comparative period have been reclassified to conform with the presentation adopted in the current period.|
|(g)||These figures do not include any effect attributable to the change in Breakage estimates made during the fourth quarter of 2011 in the Nectar and Air Miles Middle East programs.|
A non-GAAP measurement.